Departmentation (Grouping)

One reason organizations exist is to do things that would be hard for one person to
do by themselves. For example, it's hard to conceive of one person building an office
building. Instead, we have organizations of thousands of people with diverse skills
that work together to build buildings. However, coordinating, controlling and just
keeping track of a lot of individuals introduces its own problems.
One way to solve these problems is to create a hierarchical system of supervision, so
that small groups of workers (up to say, 50 people) are supervised by coordinators
(managers). Depending on how many people there are in the organization, the
coordinators themselves need to be organized into groups supervised by higher level
managers, and so on. Part and parcel of this hierarchical supervisory system is the
cutting up of the organization into groups (departments).
The question arises: On what basis should we carve up the members of the
organization into subunits? What would happen if we did it randomly, without regard
for tasks? One problem would be that each manager would have to be aware of what
needed to be done in every area of the organization, in order to direct his/her
workers. This would be impossible in most cases.

Common Bases For Departmentation

What organizations actually do is group people in a way that relates to
the task they perform. This still leaves a lot of possibilities. Here are six
common bases for departmentation:

1. Knowledge and Skill. People are grouped by what they know. For example,
hospitals have departments like Neurology, Allergy, Cardiology, Internal
Medicine, Gastro-Enterology, etc.
2. Work Process. Workers are grouped based on the process or activity used by the
worker. For example, a manufacturing company may create separate casting,
welding and machining groups. Often, it is the underlying technology that
determines the departmentation. For example, a print shop may have separate
letterpress and offset departments -- two different processes for getting the same
outputs.
3. Business Function. Grouping by the basic function in the organization: purchase
supplies, raise capital, generate research, etc. This leads to the familiar
departments of manufacturing, marketing, engineering, finance, and so on.
4. Time. When work is done. For example, shifts in a factory or hospital or hotel.
5. Output. Grouping based on the products or services that the employee works on.
For example, a manufacturer may have different divisions for each of its product
lines.
6. Client. Grouping based on the type of clients their work is ultimately sold to. For
example, computer companies often have different sales departments for home,
small business, educational, government and large business customers.
7. Place. Groups are based on the geographical areas that they serve. For example,
during WW2, the US War Dept. was organized into 7 "theatres" corresponding to
regions of the world where the US was fighting. Similarly, Post Offices are often
divided by regions and zipcodes.
http://www.analytictech.com/mb021/departme.htm

Whereas major departments of an organization are established by top-level managers, supervisors

primarily are concerned with activities within their own areas. Nevertheless, from time to time
supervisors will be confronted with the need to departmentalize within their areas, and they
should be familiar with the alternatives available for grouping activities. These are the same
options available to top-level managers when they define the major departments.
Departmentation is usually done according to function, products or services, territory, customer,
process and equipment, time, or matrix design.

Functional Departmentation. The most widely used form of departmentation is to group

activities by function—the jobs to be done. Consistent with the idea of specialization and division
of work, activities that are alike or similar are placed together in one department and under a
single chain of command. For example, word processing, data-entry, and duplicating services
may be grouped together into a clerical department or information processing center; sales and
promotional activities into a marketing department; manufacturing assembly work into a
production department; inspection and monitoring activities into a quality control department;
and so on. As an enterprise undertakes additional activities, these new activities—for the most
part—are simply added to the already existing departments.

Functional departmentation is a method that has been and still is successful in most
organizations. It makes sense since it is a natural and logical way of arranging activities.
Grouping departments along functional lines takes advantage of occupational specialization by
placing together jobs and tasks that are performed by people with the same kinds of training,
experience, equipment, and facilities. Each supervisor is responsible primarily for an area of
operation upon which his or her energy and expertise can be concentrated. Functional
departmentation also facilitates coordination since a supervisor is in charge of one major area of
activity. It is easier to achieve coordination this way than to have the same functions performed in
different departments under different supervisors.

In recent years, many companies have utilized extensive cross-training

and multi-skilling of employees in order to develop more flexibility in
operations. A flexible workforce is one that has employees trained to handle
a variety of skills needed to perform multiple tasks in production, customer-
service departments, or processes. This is in contrast to the more traditional
functional arrangement where each worker is responsible for only one job, or
where each worker performs narrowly defined tasks in the operation.
Although developing a flexible workforce can be costly and time consuming,
the advantages can be well worth the effort. Supervisors can more easily
delegate work to employees who better understand the total departmental
functions, and the employees also can assume additional responsibilities and
tasks in a more collaborative fashion aimed at getting the departmental work
done.

Product or Service Departmentation. Many companies utilize product or service

departmentation. To departmentalize on a product basis means to establish each major product (or
group of closely related products) in a product line as a relatively independent unit within the
overall framework of the enterprise. For example, a food products company may choose to divide
its operations into a frozen food department, a dairy products department, a produce department,
and the like. Product departmentation can also be a useful guide for grouping activities in service
businesses. For example, most banks have separate departments for commercial loans,
installment loans, savings accounts, and checking accounts. Many home maintenance firms have
separate departments for carpentry, heating, and air-conditioning services.

Geographic (Territorial, Locational) Departmentation. Another way to departmentalize is by

geographical considerations. This approach to departmentation is important for organizations
with physically dispersed activities. Large-scale enterprises often have divisions by territories,
states, and cities. Increasingly, many companies also have international divisions. Where units of
an organization are physically dispersed or where functions are to be performed in different
locations—even different buildings—geographic departmentation may be desirable. Locational
considerations may be significant even if all activities are performed in one building but on
different floors. An advantage of territorial departmentation is that decision-making authority can
be placed close to where the work is being done.

Customer Departmentation. Many organizations find it advisable to group activities based on

customer considerations. The paramount concern here is to service the differing needs and
characteristics of different customers. For example, a university that offers evening programs in
addition to day programs attempts to comply with the requests and special needs of part-time and
full-time students. Companies may have special departments to handle the particular
requirements of wholesale and retail customers. Major department stores may attempt to reach
different segments of the buying public, such as customers for a “bargain basement” or lower-
priced division at the one extreme and an exclusive high-priced fashion division at the other
extreme. Most hospitals have separate units for outpatient services.

The importance of maintaining close customer relationships in today’s competitive

climate is well recognized by most organizations. Supervisors often are the key representatives in
the effort to build strong interpersonal relationships with customers. Coordinated efforts to
communicate and build trust with customers has been referred to as customer relationship
management (CRM). This type of effort may be spearheaded by the marketing/sales department,
but supervisors from other departments with customer linkages are usually expected to be part of
whatever processes are appropriate and helpful to build customer goodwill and loyalty.

Process and Equipment Departmentation. Activities also can be grouped according to the
process involved or equipment used. Since a certain amount of training and expertise are required
to handle complicated processes and operate complex equipment, activities that involve the use of
specialized equipment may be grouped into a separate department. This form of departmentation
often is similar to functional departmentation. For example, in a machine shop department,
specialized equipment is used but only certain functions are performed; function and equipment
become closely allied. A data processing department utilizing a mainframe computer may serve
the processing requirements of a number of operations and departmental needs throughout an
organization.

Time Departmentation. Another way to departmentalize is to group activities according to the

period of time during which work is performed. Many organizations are engaged in round-the-
clock operations and departmentalize on the basis of time by having work shifts. Activities are
departmentalized by time (day, afternoon, night shift), although the work operations of all the
shifts for the most part may be the same. Here, too, there may be an overlap in the
departmentation process. Where time is a partial basis for departmentation, it is likely that other
factors will be involved. For example, a maintenance division—based on function and services—
may be further departmentalized by shifts, such as the maintenance night shift. Shift
departmentation can create organizational questions of how self-contained each shift should be
and what relationships should exist between regular day-shift supervisors and the off-shift
supervisors.

Shift work also can contribute to numerous other employee problems

and concerns, including personal safety, sleep deprivation, child care, and
work/family conflicts. Night-shift workers often perceive that they are viewed
as “second-class citizens” who have limited access to the training and
development opportunities afforded to day-shift personnel. Supervisors of all
shifts need to be cognizant of and sensitive to these types of shift workers’
concerns. It may be possible for supervisors to coordinate certain types of
scheduling rotation, training opportunities, and other efforts (perhaps with
the assistance of the human resources department) designed to raise and
maintain shift worker morale and job performance to acceptable levels.

Mixed Departmentation. In order to achieve an effective structure, a supervisor may have to

apply several types of departmentation at the same time. This is referred to as “mixed”
departmentation. For example, there may be an inventory control clerk (functional) on the third
floor (geographic) during the night shift (time). In practice, many organizations have a composite
departmental structure involving functional departmentation, geographic departmentation, and
other forms. All of these alternatives may be available to supervisors to facilitate the grouping of
activities in their departments (see accompanying Figure).
There are some departments in which additional subgroupings are not needed. However,
supervisors of departments of considerable size may find it necessary to divide various jobs and
skills into different groups under a lead person or foreman, who in turn will report to the
supervisor. Whatever structure is chosen, the purpose of departmentation is not to have a
beautiful, well-drawn organization chart. The purpose is to have a sound structure that will best
achieve the objectives of the department and the entire organization.

http://www.swlearning.com/management/leonard/leonard_9e/ch08_various_structure
s.doc

Advantages:

• Advantage of specialization

• Easy control over functions

• Pinpointing training needs of manager

• It is very simple process of grouping activities.

Disadvantages:

• Lack of responsibility for the end result

• Overspecialization or lack of general management

• It leads to increase conflicts and coordination problems among departments.

http://allsubjects4you.com/Management-departmenation.htm

What different patterns of horizontal specialization

can be used within the organization?

 Horizontal specialization.
– A division of labor that establishes specific
work units or groups within an organization.
– Often referred to as departmentation.
– Pure forms of departmentation.
• By function.
• By division.
• By matrix.

Organizational Behavior: Chapter 11 33

What different patterns of horizontal specialization

can be used within the organization?

 Functional departmentation.
– Grouping individuals by skill, knowledge, or
action.
– The functional pattern dominates in many
small firms.
– Large firms use the functional pattern in
technically demanding areas.

Organizational Behavior: Chapter 11 34

What different patterns of horizontal specialization
can be used within the organization?

 Advantages of functional departmentation.

– Yields very clear task assignments, consistent
with an individual’s training
– Individuals within a department can easily
build on one another’s knowledge, training,
and experience.
– Provides an excellent training ground for new
managers.
– It is easy to explain.

Organizational Behavior: Chapter 11 35

What different patterns of horizontal specialization

can be used within the organization?

 Disadvantages of functional departmentation.

– May reinforce the narrow training of individuals.
– May yield narrow, boring, and routine jobs.
– Communication across technical areas is complex and
difficult.
– “Top management overload” with too much attention
to cross-functional problems.
– Individuals may look to the organizational hierarchy
for direction and reinforcement rather than focusing
attention on products, services or clients.

Organizational Behavior: Chapter 11 36

What different patterns of horizontal specialization
can be used within the organization?

 Divisional departmentation.
– Groups individuals and resources by products,
territories, services, clients, or legal entities.
– Often used to meet diverse external threats and
opportunities.

Organizational Behavior: Chapter 11 37

What different patterns of horizontal specialization

can be used within the organization?

 Advantages of divisional departmentation.

– Promotes adaptability and flexibility in meeting the
demands of important external groups.
– Allows for spotting external changes as they emerge.
– Provides for the integration of specialized personnel.
– Focuses on the success or failure of particular
products, services, clients, or territories.

Organizational Behavior: Chapter 11 38

What different patterns of horizontal specialization
can be used within the organization?

 Disadvantages of divisional departmentation.

– Does not provide a pool of highly trained individuals
with similar expertise to solve problems and train
others.
– Allows duplication of effort, as each division tries to
solve similar problems.
– May give priority to divisional goods over the health
and welfare of the entire organization.
– Creates conflict between divisions over shared
resources.
Organizational Behavior: Chapter 11 39

What different patterns of horizontal specialization

can be used within the organization?

 Matrix departmentation.
– Uses functional and divisional forms
simultaneously.
– Workers and supervisors in the middle of a
matrix organization have two bosses — one
functional and one divisional.
– Many firms use elements of a matrix structure
without officially designating the organization
as a matrix.

Organizational Behavior: Chapter 11 40

What different patterns of horizontal specialization
can be used within the organization?

 Advantages of matrix departmentation.

– Combines strengths of both functional and
divisional departmentation.
– Blends technical and market emphases.

– Provides a series of managers able to converse

with both technical and marketing personnel.

Organizational Behavior: Chapter 11 41

What different patterns of horizontal specialization

can be used within the organization?

 Disadvantages of matrix departmentation.

– Very expensive.
– Unity of command is lost.
– Authority and responsibilities of managers
may overlap, causing conflicts and gaps in
effort across units and inconsistencies in
priorities.
– It is difficult to explain to employees.

Organizational Behavior: Chapter 11 42

What different patterns of horizontal specialization
can be used within the organization?

 Mixed forms of departmentation.

– Organizations often use a mixture of
departmentation forms.
– Using a mixture of forms helps balance the
advantages and disadvantages of each.
– Mixed forms are discussed in Chapter 12.

Organizational Behavior: Chapter 11 43